Fiscal Multipliers and the State of the Economy

32 Pages Posted: 18 Jan 2013

See all articles by Anja Baum

Anja Baum

University of Cambridge - Faculty of Economics and Politics

Marcos Poplawski-Ribeiro

International Monetary Fund (IMF)

Anke Weber

International Monetary Fund (IMF)

Date Written: December 2012

Abstract

Only a few empirical studies have analyzed the relationship between fiscal multipliers and the underlying state of the economy. This paper investigates this link on a country-by-country basis for the G7 economies (excluding Italy). Our results show that fiscal multipliers differ across countries, calling for a tailored use of fiscal policy. Moreover, the position in the business cycle affects the impact of fiscal policy on output: on average, government spending, and revenue multipliers tend to be larger in downturns than in expansions. This asymmetry has implications for the choice between an upfront fiscal adjustment versus a more gradual approach.

Keywords: Fiscal policy, Production growth, Business cycles, Group of seven, Cross country analysis, fiscal multipliers, business cycle, nonlinear analysis, fiscal multipliers., fiscal policy, fiscal adjustment, government spending, fiscal consolidation, fiscal shock, fiscal contraction, fiscal data, government expenditure, fiscal multiplier, fiscal policies, fiscal spending, fiscal shocks, fiscal expansion, public debt, fiscal consolidations, fiscal stimulus, tax revenue, tax cuts, fiscal contractions, tax changes, tax policy, fiscal deficit, expansionary fiscal contractions, public expenditures, tax rates, fiscal policy decisions, business cycle, taxation, discretionary fiscal policy, fiscal transpa

JEL Classification: E32, E62, C54

Suggested Citation

Baum, Anja and Poplawski-Ribeiro, Marcos and Weber, Anke, Fiscal Multipliers and the State of the Economy (December 2012). IMF Working Paper No. 12/286. Available at SSRN: https://ssrn.com/abstract=2202637

Anja Baum

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

Marcos Poplawski-Ribeiro

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Anke Weber

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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